Automatic Data Processing (ADP) Offering Great Entry Point And Long-Term Fundamentals

Waiting for a great trade can take time. The wait is over for Automatic Data Processing, Inc. ADP as it is at a great buying point right now. 

Here's why. 

The Trade Setup

Going back to 2009, except for the quick "COVID" selloff in 2020, ADP is in a long-term rising channel. The price tends to fall 15% to 20% and then rally back to the highs of the channel.
The rallies back to the top of the channel have been 25% or much more, depending on how long the trade is held.

Chart source: TradingView
ADP is at the bottom of the channel right now, having recently fallen 20% from its December high ($274.92).
For a trade lasting two to six months, $275 to $290 is the price target. That’s 22% to 30% above the current price ($223.91).

For a short-term trade, consider limiting the risk to 6% to 10% downside. That keeps the reward:risk attractive. For example, keep downside risk to 6% in order to make 20% or more.

There is also the option to hold the stock for the long-term, and there is strong evidence to support that.

Buying ADP for the Fundamentals and the Dividend

ADP is at an attractive buy point technically, but it is also a strong fundamental performer. 

• It has increased earnings per share (EPS) at an average rate of 14.2% over the last five years. Analysts expect 14.6% yearly EPS growth over the next five years. 

• ADP has increased its dividend for 48 consecutive years. The stock currently yields 2.2%, and the dividend payout amount has increased 14.7% per year over the last five years.

• Automatic Data Processing returns have outpaced the S&P 500 returns by 5.7% per year over the last decade. The S&P 500 has an annualized return of 12.5% over that time frame, and ADP has an annualized return of 18.2%. Going back to 2000, ADP returns have more than doubled SPDR S&P 500 ETF Trust SPY returns.

Chart source: TradingView

ADP has been a long-term steady performer. It continually raises its dividend, has outpaced S&P 500 returns for decades, and is at an attractive buy point technically. 

Automatic Data Processing provides human resources solutions to small and a large business, as well payroll, retirement, and insurance services.

Disclaimer: The author has no current positions, but may initiate a position over the next week in the $219 to $226 price region.